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What Is the Augusta Rule?
IRC Section 280A(g) states that if you rent your personal residence for 14 days or fewer per year, you do not have to report the rental income on your tax return. Period. No income tax, no self-employment tax, no reporting requirement.
The rule was originally designed for homeowners in Augusta, Georgia, who rented their homes during the Masters golf tournament. But the statute applies to any homeowner, anywhere, for any purpose.
The tax planning application: if you own an S-Corp, your company can rent your home for board meetings, strategic planning sessions, company events, or team retreats. The S-Corp gets a legitimate business deduction. You receive tax-free income. Both sides benefit.
How Much Can You Save?
If your home could rent for $1,500/day as an event space and your S-Corp rents it 12 times, that is $18,000 in tax-free income to you and $18,000 in business deductions for your S-Corp. At a 37% marginal rate, the combined benefit exceeds $10,000.
Requirements
The Augusta Rule is simple in concept but requires strict compliance:
The 14-Day Limit
You can rent for a maximum of 14 days per tax year. Day 15 triggers a completely different tax treatment: ALL rental income becomes taxable and you must report it on Schedule E. There is no proration.
Fair Market Rent
The rental rate must reflect what a third party would pay for similar space. Charging $5,000/day for a 1,500 square foot ranch home in a rural area will not survive scrutiny. Research comparable venues in your market.
Legitimate Business Purpose
Your S-Corp must have a real business reason to rent the space. Valid examples:
- Board of directors meetings or advisory board sessions
- Annual strategic planning retreats
- Employee training sessions
- Client appreciation events
- Holiday parties or team-building events
Arm's-Length Transaction
Because you are renting to your own entity, the IRS applies related-party scrutiny. The transaction must look exactly like it would between unrelated parties: written agreement, market-rate pricing, actual payment, and genuine business use.
Documentation
The Augusta Rule is only as strong as your documentation. Assemble these for each rental day:
Required Documents
- Written rental agreement: Specify the date, hours, rental rate, property address, and business purpose. Both parties (you as landlord, S-Corp as tenant) should sign.
- Fair market rent analysis: Gather 3+ comparable venue rates. Screenshot listings from Peerspace, VRBO, or local event venues. Save the research in your tax file.
- Proof of payment: The S-Corp must pay by check or electronic transfer. Document the payment in both the S-Corp books and your personal records.
- Meeting minutes or event records: Document what business activity occurred. Attendee list, agenda, and photos strengthen the record.
- Calendar entries: Both your personal calendar and the S-Corp calendar should show the event.
Pro Tip
Create a folder for each rental day. Include the signed agreement, comparable research, bank statement showing payment, meeting agenda, and any photos. If audited three years later, you want to pull a clean file, not scramble for records.
Common Mistakes
The Augusta Rule is straightforward, but these errors can invalidate the entire strategy:
Inflated Rental Rates
Charging $3,000/day for a modest suburban home when comparable venues charge $500 is a red flag. The IRS can recharacterize the excess as a taxable distribution from your S-Corp. Keep rates defensible with comparable evidence.
Exceeding 14 Days
Renting for 15 or more days means all income is taxable. Track carefully. Note that a "day" means any portion of a day. If your S-Corp rents the home from 6 PM to 10 PM, that counts as one full day.
No Actual Business Use
Labeling your family's Sunday dinner as a "board meeting" will not hold up. The business activity must be genuine. If your S-Corp has no employees, no clients, and no business reason to meet at your home, the deduction is vulnerable.
No Written Agreement or Payment Trail
Verbal agreements and journal entries are not sufficient. The IRS looks for the same formality you would expect between unrelated parties. If you would not rent to a stranger this way, do not rent to your S-Corp this way.
Mixing Personal and Business Use
If the S-Corp rents your home on Saturday for a planning session, the space should be used for business that day. Hosting a business meeting from 10 AM to 2 PM and then a personal dinner party that evening weakens the position.
Warning
The Augusta Rule has gained popularity on social media, and the IRS has noticed. Audit risk increases when the deduction appears on an S-Corp return with no other evidence of business use at the home. Do it right or do not do it at all.
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